(Mercer) Mercer and CFA Institute have released the 15th annual Mercer CFA Institute Global Pension Index (MCGPI). The Netherlands’ retirement income system has regained the top spot on the list, with Iceland and Denmark taking second and third places respectively.
In addition to identifying the world’s top pension systems, the report examines the potential of artificial intelligence (AI) to improve pension and social security systems and provide people a better quality of life in retirement.
“The ongoing expansion of AI within the operations and decisions of investment managers could lead to more efficient and better-informed decision-making processes, which could potentially lead to higher real investment returns to pension plan members,” commented Senior Partner at Mercer and lead author of the study, Dr. David Knox. “AI also has the potential to improve member-engagement and help individuals make long-term decisions about their financial decisions. Both advances should improve retirement outcomes.”
The report, however, makes clear that AI is not without risks, including modeling challenges and ethical concerns as well as the need for optimal data privacy and cybersecurity. In developing these systems, it is essential that AI models have strong governance and clear accountability to reduce biases and unjustified responses. Safeguards are critical for pension plans to retain their members’ long-term trust.
“AI by itself is not the complete answer. There will always be a need for human oversight. Despite these risks, AI has the opportunity to deliver a higher standard of living in retirement — a worthwhile objective for all pension systems,” Dr. Knox continued.